Posts for Tag: Financial History

Getting Better with Age

I wrote this for CFA Institute and first published it on the Enterprising Investor.

I got an email this week that I’m still thinking about. Here’s the first line:

“I’m not going to pull punches: This year’s 70th CFA Institute Annual Conference may be the best Annual Conference.”

It came from Peter M.J. Gross, who does not italicize lightly. I buy it completely, but it’s an extraordinary statement.

By the time the 10th of these rolled around in 1957, CFA Institute Annual Conferences were already a source of insight you couldn’t get anywhere else. As CFA Institute membership grew, these events became an unusually good way to take the temperature of global markets. A retrospective published in 1997 noted that “Japanese analysts could be found at every . . . annual conference since 1967.

That’s still true, but today CFA Institute has members in 159 countries. Not everyone can make the trip. To be frank, I’m not sure where they would all fit if they could. The only stadium I’m aware of that’s large enough to seat them all is located in North Korea. It’s worth cultivating a sense of adventure if you’d like to become a durable feature in this profession, but you won’t need to book a flight on Air Koryo to follow along this year. I suspect Peter is excited because this means you’re more likely to tune in.

Old Friends

Jason Voss, CFA, should be well known to regular readers of Enterprising Investor. He will be co-hosting the three-day broadcast from the conference alongside Kelli Palmer.

Here is my first recommendation for this weekend: Mark your calendar for 1:45 PM Eastern Daylight Time (EDT) on Sunday, 21 May, when the live broadcast from Philadelphia begins. After a word from CFA Institute president and CEO Paul Smith, CFA, we’ll jump right into the sharing economy and keep going until Richard Thaler finishes his keynote.

My second recommendation is to ask yourself a tough question: What can’t you say?

The inspiration for this comes from none other than John Bogle, who will be speaking at the 70th CFA Institute Annual Conference. The first of Bogle’s many bylines in the CFA Institute Financial Analysts Journal® was pseudonymous. The article concerned mutual funds, as you might expect, but contains the phrase “mutual funds in general have met the test of time.”

Fifteen years later, Bogle would go on to start Vanguard, which is not exactly based on that premise. His discussion of how his thinking changed in the intervening period is priceless and underlines the importance of writing your thoughts down. Another lesson to learn is that none of us are perfect. When asked why he made such a stunning reversal, he offered a simple answer: “As the facts changed, of course my opinion changed!”

Who bet the farm?

Publications ranging from The Economist to USA Today have noted increasing interest in farmland, which some refer to as “gold with a coupon.” The volatility implied by that characterization has manifested recently in the United States, and farm prices have been falling since 2013.

This is a big deal: More than 30% of farmers in Minnesota lost money in 2016. A note last week from the Federal Reserve Bank of Kansas City suggested that trends may intensify. It’s not a local story either. The Financial Times has warned of a long-term global oversupply in agricultural markets, but the Savills Global Farmland Index is reporting steady growth in farm values. Can both trends persist?

Has financial innovation mattered yet?

In cryptocurrency land, a growing number of unconfirmed transactions and fees in excess of $2 per transaction are drawing attention away from bitcoin and towards Ethereum, a newer cryptocurrency that is about a third of the size of bitcoin in terms of total market capitalization.

But maybe the better part of wisdom is to zoom out. A recent paper from Thomas Philippon asserts that the unit cost of financial intermediation has been a roughly stable 2% per year from 1886 to 2015. How much disruption does it take to change a constant?

A Few More for Fun